For an interior design studio, FF&E procurement is often bigger than the fee income — and the single most consequential question in your accounts is whether you buy as agent or as principal. The answer changes your turnover, your VAT position, your margin disclosure and your risk.

The distinction

Acting as principal, you buy the sofa in your own name and sell it on to your client: the full sale price is your turnover, you charge VAT on the whole amount, and the margin between buy and sell is yours to keep — and yours to defend if the piece arrives damaged. Acting as agent, you arrange the purchase on your client's behalf: only your procurement fee or commission is your income, VAT is charged on that fee, and the supplier's risk sits with the supplier and the client.

The label in your appointment document doesn't settle it. HMRC and the courts look at the substance: whose name is on the supplier invoice, who takes title to the goods, who bears the risk of loss, who sets the price to the client, and whether the client knows what you paid.

Why it matters so much

As principal, a studio with £400,000 of fees and £1.2m of procurement reports £1.6m of turnover — which affects VAT registration, audit thresholds, insurance, and how the business reads to a bank or buyer. Margins are exposed if a client demands open-book. As agent, the accounts show the fee income that reflects the real economics, but you must run client money properly and cannot quietly mark up.

Cross-border projects raise the stakes again: as principal you may be importing goods, owing duty and import VAT, and potentially needing overseas VAT registrations; as agent those obligations generally sit with your client.

Getting it right

Decide the model deliberately, per project if necessary. Align the contract, the invoicing, the supplier relationships and the bookkeeping so they all tell the same story — a contract that says agent and invoicing that behaves like principal is the worst position, because HMRC gets to choose the reading that suits them.

If your procurement terms have grown organically rather than by design, a one-hour review with your Practice team will usually tell you whether the structure still fits the studio you've become.